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spk07: Good morning. My name is Michelle and I will be your conference operator today. Welcome to New Gold's first quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. And please be advised that today's conference call and webcast is being recorded. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, simply press star then number one on your telephone keypad. If you would like to withdraw your question, please press the star, then the number two. I would now like to hand the conference over to Ankit Shah, VP of Strategy and Business Development. Please go ahead, sir.
spk01: Thank you, Michelle, and good morning, everyone. We appreciate you joining us today for New Gold's first quarter 2022 earnings conference call and webcast. On the line today, we have Renaud Adams, President and CEO, and Rob Chauzet, our CFO. Should you wish to follow along with the webcast, please sign in from our homepage at newgold.com. Before the team begins the presentation, I'd like to direct your attention to our cautionary language related to forward-looking statements found on slides two and three of the presentation. Today's commentary includes forward-looking statements relating to Newgold. In this respect, we refer you to our detailed cautionary note regarding forward-looking statements in the presentation. You are cautioned that the actual results in future events could differ materially from those expressed or implied in forward-looking statements. Slides 2 and 3 provide additional information and should be reviewed. We also refer you to the section entitled Risk Factors in NUGLE's latest MD&A and other filings available on CDAR, which set out certain material factors that could cause actual results to differ. In addition, at the conclusion of the presentation, there are a number of endnotes that provide important information and should be reviewed in conjunction with the material presented. I'll now turn the call over to Renaud.
spk08: Thanks, Hank, and good morning, everyone. So before I pass it to Rob to discuss our quarterly financial results, I just wanted to take a moment to discuss some of the changes we've made at our company and the challenges we've experienced, like many of our peers, during the quarter. Over the past two years, our teams have adapted quickly to make changes in light of COVID. I'm very proud of our group and the health and safety focus at our operations. Like many of our peers, we've also experienced a higher level of COVID cases earlier in the year, which impacted productivity levels to start 2022. But despite this, our teams were resilient and we delivered a good quarter. Inflation has challenged many of us in the industry, and we're no exception. We felt the same pressure as our peers, mainly on diesel consumables, but also electricity and Rainier River. But I've been able to partially offset these higher prices with the benefit of having two Canadian assets in the period of weakening of Canadian dollar. We continue to evaluate potential optimization and assess cost reduction initiatives in an effort to mitigate these pressures. We remain committed to delivering on our guidance. During the quarter, we also continue to advance on our longer-term priorities. At Rainy River, intrepid development advanced, and we look forward to initiating mining later this year. I'm also very pleased with the updated Rainy River technical report we completed in March, which has extended our mine life to 2031. I will discuss this later in the presentation, but this is a significant accomplishment for the team and a positive milestone for our business. At New Afton, the B3 ramp-up continues. We've made good progress on the C-Zone development, and we completed a commission of our Technic and Amanda tailings facilities. I'm very pleased to welcome Patrick Pat, as we knew him as the new CEO of Newgold. Pat brings extensive technical knowledge operational and capital execution experience in the mining sector and i'm sure his addition to our team will be invaluable and as we continue to advance key project of our company and unlock potential organic opportunity i'm really looking forward to hearing from pat and our q2 review and more to come as we move forward i'm looking forward to building on our first quarter and continuing to deliver value for all our stakeholders. And with that, I will now pass it to Rob Chausset, CFO. Rob?
spk02: Thanks, Renaud, and good morning. Slide 5 provides our operating highlights for Q1. Production details are consistent with our April production press release. During Q1, the company produced 87,600 gold equivalent ounces. The amount consisted of 8.2 million pounds of copper and approximately 58,800 gold ounces from Rainy River, 9,267 gold ounces from New Afton for a total of 68,100 gold ounces. The lower equivalent gold production as compared to the prior year is primarily due to lower grade and tons processed at New Afton. Our operating expense per ounce was in line with our prior quarter. Consolidated all and sustaining costs for the quarter were $17.78 per equivalent ounce, higher than the prior quarter, primarily due to higher sustaining capital spend and lower sales volume at New Afton, partially offset with higher sales volume at Rainy River. As Renaud mentioned, during Q1, we experienced inflationary challenges that have been experienced across the industry, particularly with regard to fuel prices. And with the benefit of a weaker Canadian dollar, as well as optimization and cost reduction initiatives, we are offsetting a good portion of the inflationary pressures. Going forward, we'll continue to work on minimizing any impacts. Turning to slide six, first quarter revenue was $175 million, driven by sales of approximately 70,500 gold ounces at an average realized gold price of $18.97 per ounce. and sales of 9.2 million pounds of copper at 453 per pound. Q1 revenue was 6% higher than the prior year quarter, primarily due to higher metal prices, partially offset by lower copper sales volume. Operating cash flow before working capital adjustments was 66.4 million, or 10 cents per share, for the quarter in line with the prior year quarter. The company recorded a net loss of 7.8 million or one cent per share during Q1 compared to net earnings of two cents per share in Q1 2020. After adjusting for certain charges, net earnings were 10.3 million or two cents per share in Q1 compared to net earnings of one cent per share in the first quarter of 21. Our Q1 adjusted earnings includes adjustments related to our gains and losses related to unrealized adjustments on the Rainy River Stream mark to market and the free cash flow royalty at New Afton. Our MD&A has more details on these measures. Capital expenditures, our total capital and leases for the quarter was $78.4 million. $55.5 million was spent on sustaining capital and $22.9 million on growth capital. Sustaining spend was primarily related to planned tailings work at both operating assets, capital stripping at Rainy River, and the B3 mine development at New Afton. Growth capital was focused on project development, specifically the sea zone at New Afton and the underground intrepid zone at Rainy River. Slide seven provides details of our capital structure. During the quarter, we announced that we will be redeeming the remaining $100 million of our 2025 senior secure notes in mid-May. And cash on hand, as at March 31st, 22, was $432 million. The decrease in cash from the year end is primarily due to interest paid, and cash settlements on non-current derivative financial liabilities. With that, I'll turn the call back to Renaud.
spk08: Thanks, Rob. I will now make some additional remarks on our operational performance in the first quarter. I'm on slide 10. The Renaud River mine had a lighter quarter in terms of total tons mined, mainly due to higher COVID cases in the start of the quarter, which improved as the quarter progressed. We had a strip ratio of approximately 5 to 1, and this was in line with our strategic approach to use winter months for the main capitalized waste, which focused on positioning the phase 4 mining. The lower ton mine did not have a meaningful impact on grades, and the total productions of nearly 60,000 gold equivalent was up from the same period of 2020. The milling rate was impacted by additional Sorry, in 2021. The milling rate was impacted by additional downtime related to crushing and conveying circuit in adverse weather conditions impacting also the crush stockpile movement, all of which was back to normal as the quarter progressed. All in all, the team was very resilient and navigated around adverse conditions to deliver a good quarter. Despite the inflationary pressures, the team delivered lower operating expenses compared to the same period of 2021, and a free cash flow of approximately $15 million for the quarter. Rainier River continues to work on seeking ways to reduce costs and improve productivity, so such increase of fuel and consumables can partially to fully be mitigated. For example, the mining team delivered an improved tire life year over year of nearly 40% of setting current potential and further increase of tire prices. The efforts continue in improving other consumable uses such as grinding media and cyanide, and we continue to see potential improvement in our overall pit operational efficiency with objective to achieve production with use of less truck, for example, so we reduce operational and maintenance costs present and future. Bringing the mill back to expected 27,000 tons a day mark would also be a huge contributor to our overall cost performance. I have just returned from Raney, and I remain very positive on our ability to deliver on our 2022 plan. The intrepid development continued in the first quarter, with over 500 meters of total development achieved. We are now developing an ore on level 175, 150, and 125 in prep for first long-haul doping to take place in the second half of the year. And the reconciliation to date is in line with the resource model. On slide 11, I'm very pleased with the result of our updated technical report at Rainy River, which has extended the mine life to 2031. Our updated mine plan illustrated an attractive average production profile of 310,000 gold equivalent ounces over the period of 2022-2027, and over 250,000 gold equivalent ounces for the whole life of mine. with full transition from open pit to underground during the period of 2020 and 26 for an estimated gross capital of only $71 million to complete the underground pre-production work for both intra-pit and central zone. A very attractive cost approach using in-pit portal design to access mineralization with minimal development required. For the open pit portion, significant reduction of strip ratio and sustaining capital post-2023, when all capitalized stripping is complete, reducing total mining and maintenance requirement. So overall, life of mine all-in sustaining costs of nearly $1,050 per gold equivalent ounce, bringing excellent margin and free cash flow as we deliver on our executions. On slide 13 at New Afton, in-line quarter at New Afton as the lower-tonne mines were perfectly aligned with the planned completion of the Lift 1 activities, with the exceptions of recovery level, which will continue until we initiate input tailings disposition planned for later this year. The B3 development and production ramp-up continued in Q1, and all efforts are being made to accelerate completion of development ahead of schedule which is currently planned for the fourth quarter of this year. The C-Zone development comes to need to advance in the first quarter with nearly 930 meters of total development achieved and a successful commissioning of the newly built TAP facilities months ahead of initiation of our indemnification. During the quarter, we've completed 32 diamond drilling holes, totaling nearly 10,500 of underground infill or an artificial intelligence target that were drilled last year, and also a one-hole of exploration on the Cherry Creek Trim. The company intends to release an exploration update in the latter part of the second quarter, which will also include an update on our exploration efforts operating. On slide 14, and as I conclude on the presentation portion of this call, At Radio River, we continue to bid on our recently filed updated technical report, and while we continue to seek opportunities to improve margin on remaining open pit ounces, we are now turning our strategic efforts on delivering a strong transition to underground mining with bringing first intrepid in production. At New Afton, completion of the B3 development and ramp-up remains our key priority, while we continue to deliver the season on time and on budget, which include receive of the permit in the second half of 22. I want to thank all our employees and contractors for their restless efforts and commitment in executing on our 2022 guidance, and a very special thanks to our Board of Directors, community partners, and shareholders for their continued support in such challenging times. In my opening remarks, I made a comment that Pat is joining us in its first day, sitting right next to me today. And I would ask you, Pat, if you have just one first comment and welcome.
spk03: Yeah, thank you, Renaud. I'm really pleased to join New Gold. You know, I already have a working experience with Rob, where we had to work together in the past, and to join Renaud and the team, it's... It's really exciting for me. Well, mainly the authenticity approach. I think it's a value that is crucial for me. The team is doing a good job on site. I will do my best to reinforce that, to provide a safe working place to the workers. It's crucial for New Gold. And also to continue to be in compliance with the performance and to maintain and improve our relationship with Our local stakeholders and First Nation group were supporting us in both assets. I think for me it's crucial. At the beginning, I mainly invest my time to stabilize and to be sustainable from the operation point of view and to deliver guidance. And I think I'm really excited to work with the team really.
spk08: Thank you so much, Pat. And as I said, we'll be hearing from Pat in our second quarter review. I will now turn it back to the operator for the Q&A portion of the call. Michelle?
spk07: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star 1. If you would like to withdraw your question, please press star 2. One moment for your first question. Your first question comes from Mike Parkin of National Bank. Please go ahead.
spk05: Hi, guys. Thanks for taking my questions. Can you speak on labor availability at the assets during shutdowns? Are you noticing any kind of challenges staffing contractors for shutdowns? Are you pulling from further and further away, cost pressures, that kind of thing?
spk08: Thanks, Mark, for your comment and question. As I mentioned, on the operational side, of course, it was a tough start. We did not have a really big maintenance shutdown plan during that period, so that's good. We usually plan our shutdown way ahead of schedule, so that gives a lot of flexibility to our contractors to adjust and adapt. And so I wouldn't say, you know, on the shutdown, you know, it has been on a real impact. But when it comes to on-plan shutdowns, if you have some issues and so forth, of course, you operate, you know, and any COVID situation may impact, may slow down a little bit the reactiveness of that. But all in all, I believe that it hasn't. really impacted on the maintenance and shutdown side, but more like on the regular operations, mostly around the mine at the start of the quarter. Things have improved significantly as we advance in the quarter.
spk05: Okay, great. And then slide 14 just notes that you're looking to receive the C-Zone permit in the second half of 2022. Is there any wiggle room on that that drifted out into early 2023? Is there any issues with receiving that a little later if, for whatever reason, it got delayed through maybe the government's just kind of backed up with various COVID delays?
spk08: And I appreciate that because, as everyone knows, we were impacted with the B3. We had some delays. COVID was, but at the same time, too, the B3 needed to address the input tailings, needed to address sterilizations and the watering of tailings, all of which were included in the technical discussions. There were some longer, of course, conversations and consultations with our partner First Nations at the very challenging times for them, for the provinces, all that. So everything is basically, you know, happened during the B3. When it comes to C-Zone, I like to say that there is nothing really new about the C-Zone. It's a little bit more of everything we have already permitted. And the process is advancing extremely well. First round of questions on time, answering it. Then comes the second round, and quite frankly, we're not expecting. We've completed our conversations internally as well, and support as well from our partners and communities is in place. So, no, we feel very strong that the process is following its due course. and that we could put this to bed not too late in the second half of the year. Okay, super.
spk05: That's it for me, guys. Thanks so much. Thanks.
spk07: Your next question comes from Lucas Pometat of Canaccord. Please go ahead.
spk06: Hi, good morning, and thanks for taking my questions. So just thinking about costs at Rainier River, obviously the costs this quarter were above your guidance. And I believe you had also guided to lower costs in the first half of this year. So how should we think about those going forward for the rest of the year?
spk08: We did not really guide it, you know, by half. So we've mentioned, though, at the time of the guidance is the first half just like last year at the Rainy River. So the first quarter is a higher strip ratio, more waste, slightly lower grade. And the second half, which represents only about 55% of the production, will be at the less trip ratio, so less cost to achieve higher production. So, yes, with some inflation, you know, pressure and all that. But all in all, you know, we're following our strategic approach of more waste and more pushback. So no, we did not perform that effort. So strategically, we execute as planned.
spk06: Okay, thanks. And then just to follow up, so you mentioned in your prepared remarks that the B3 zone is on track for Q4 of this year. Do you have an idea of how many tons we can expect from that area this year?
spk08: So if you look at the B3 technical approach, so once you have completed all your development and all your draw point and bell, you know, are done and that the caving takes place in its max capacity. We're talking about anywhere between the eight and two, potentially up to five, 10,000 tons a day. And so there's about like roughly we're about like 40% right now. And yeah, as we uh as we advance you know uh we hope to the the beauty of the uh or the beauty of the of the objective and the uh of accelerating and and i'm sure path will be a lot on this with the team at the new afton to accelerate and complete the development ahead schedule would allow the uh the gravity to take place, you know, and the ramp up to the full capacity taking place earlier and hopefully achieve it before the end of the year rather than early next year. So that's really what is at stake here. And accelerations and completions of the development ahead of schedule will have a big impact and would allow more caving to take place this year.
spk00: Great. Thanks for that. Thank you.
spk07: Your next question comes from Anita Soni of CIBC World Markets. Please go ahead.
spk04: Sorry, I had myself on mute. Good morning, guys. Thanks for taking my questions. The first question that I have is with respect to the unit mining cost per ton at both New Afton and Rainy River. So at New Afton, from quarter over quarter, it jumped pretty significantly. I think it was around 11 to 26 Could you provide some clarity on why it was so high this quarter on the mining costs?
spk08: It's really the type of mining I needed. The fact that we've shut down the lift one activities, so that free, what I would call that free caving, draw point picking is out now. The recovery level is all remote. And as a result of the accident last year, you know, has increased safety and SOP operating protocols, you know, practices and so forth. And the B3 tons that comes basically just, you know, from the early stage in the B3. So it's a transition zone. There is no doubt in my mind, you know, as we progress and ramp up and put The B3 development behind us, and we are basically benefiting as well as the B3 under pre-caving. The cost will come back, but it's a transition. It's all related to the transitions, the same with the sustaining capital. You're spending sustaining capital at B3, but you're still not benefiting the tons and the ounces coming from. So transition, it's difficult, but it's temporary, and eventually we'll establish ourselves and our cost will return to proper structure.
spk04: Okay, and then, so remind me again, when's the B3 zone complete?
spk08: We have normally, if we would follow, you know, the, let's call it the four bell, you know, a month, we will be completing this in the fourth quarter. The opportunity here is to really increase this even more, looking at here.
spk04: And then on Rainy River, similar question, except in this case, costs were Similar, I guess, mining costs per ton were a little bit higher, but the process costs were similar versus last year. But I guess my question is, relative to the technical report, you guys were looking at, I think, process costs in $7 per ton for this year. And I'm just trying to understand the discrepancy between the mid-nines versus the mid-sevens that you were expecting in the process, given the technical report was just released a few weeks ago.
spk08: Yeah, and it's all about the – in the first quarter, it's all about the, you know, maintenance. And, yes, there were some extra inflations and consumables and electricity went up as well this quarter. But globally speaking is when you have 27,000 tons a day and you operate at 24, so the difference in between is usually related that when you're stuck, you're spending money and – So I know we have absolutely the capacity to bring this cost back to the mark, but it's instability and it's, you know, we need to bring the mill down back to the 27 at the planned maintenance and cost and the planned operational efficiency cost as we highlighted in our 43-101. But those costs per ton that you referred to that were included in the first quarter were achieved, you know, back in 2021. So it's not something that we haven't achieved. We have achieved those. But Q1 was somewhat unstable. But those costs are absolutely achievable.
spk04: Okay. That's it for my question. Thank you.
spk08: Thank you, Anita.
spk07: Ladies and gentlemen, there are no further questions. I will turn the conference back to Ankit Shah for closing remarks. Please go ahead, sir.
spk01: Thank you, Michelle. And thanks again to everybody who joined us today. As always, if you have any additional questions, please do not hesitate to reach out to us by phone or email. Thank you, and have a great day.
spk07: Ladies and gentlemen, this concludes your conference call for this morning. We would like to thank you for participating and ask you to please disconnect your lines.
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